Creative Partnerships Key to Strong Metropolitan Economies

MarySue Barrett / Mar 31 2012

WITH MANDY BOOTH

For Release Saturday, March 31, 2012
Citiwire.net

“Lost decade.” When a politician utters a phrase so bleak about his or her own region, it’s a calculated risk: During the sharp intake of breath that inevitably follows, one wonders: Will the communities, residents and businesses he or she represents respond with innovative ideas and strong commitments to work together to avoid repeating past mistakes?

Chicago Mayor Rahm Emanuel took that chance in March with the release of World Business Chicago’s Plan for Economic Growth and Jobs, which soberly diagnoses the impact of what the mayor called the prior “lost decade.” The plan identifies 10 strategies for making the next decade a prosperous one, many requiring joint public and private sector action. Examples: enhancing the Chicago area’s competitive position as a leading transportation and logistics hub, making the region a premier tourist destination, and developing and deploying neighborhood assets to align with regional economic growth.
On the heels of the plan’s release, the international Organization for Economic Cooperation and Development (OECD) released a mammoth 300-page report about the tri-state region. It made a definite splash by detailing reasons why Chicagoland’s growth checks in at a worrisome 22nd place among top U.S. metros.

Taken together, these plans have hammered home that we’ve got plenty of work to do in metropolitan Chicago. What we do with this information will prove if we are still “The City That Works.”

The good news is that Mayor Emanuel’s gutsy words haven’t left a deafening silence in their wake. The day after the release of the World Business Chicago Plan, the mayor announced a new kind of public-private partnership in Chicagoland — a local Infrastructure Trust. The Trust, which some are calling the nation’s first city infrastructure bank, will leverage private investments to build new assets that benefit taxpayers, not sell old assets. Its first order of business will be financing $200 million in energy efficiency improvements to municipal buildings, a step predicted to save the city an estimated 20 percent annually in energy expenses, and to pay for itself in roughly five years. Though Emanuel has not pinpointed additional projects, other potential investments that could be recoup their costs include bus rapid transit, which Chicago is exploring along several routes.

Former President Bill Clinton was the surprise guest at the announcement of the Infrastructure Trust, driving home the point that innovative tools for financing water, sewer, energy, and transit infrastructure needs — while protecting taxpayers — are being used routinely around the globe, yet are still fairly new in the U.S. “Conflict may be good politics but it’s terrible economics,” said Clinton. “I’m here because I want to draw attention to something good that’s working.”

All this makes eminent sense. An economy that functions seamlessly and that puts more people to work is precisely what metropolitan Chicago needs. And we need an attitude adjustment as part of the solution: It simply is no longer viable to expect emerging economic sectors to “go it alone.” With so much to do to forge ahead on the 10 strategies identified, as the Chicago region starts to implement this plan, more creative and targeted partnerships will be needed.

The reality is that successful economic resurgence in the Chicago area, and other metropolitan regions, will require an array of goal-driven, right-sized and coordinated strategies in the image of the proposed Chicago Infrastructure Trust. Successful strategies have clear features: They’re aligned with regional goals, they address challenges at the appropriate scale, and they involve the right partners. And that means all the players have to get outside their comfort zones: working across municipal borders, busting silos among government agencies, and bridging the public and private sectors.

More and more, metropolitan Chicago is taking on this challenge. Our ambition is to be known as a laboratory for even more models as they prove their ROI. The week after the OECD released its analysis of Chicagoland, the nonprofit Metropolitan Planning Council (MPC-which I lead), hosted its third Urban Exchange in Gary, Ind. Gary has been a depressingly familiar example of a city struggling for decades with disinvestment. Yet today it’s starting to personify a more hopeful story. Newly elected Gary Mayor Karen Freeman-Wilson has embraced the goal-driven, right-sized and coordinated approach, right down to her administration’s “Team Gary” lapel pins. Early in her first 90 days, she brought together all of Gary’s elected officials to form a compact to speak with one voice regarding key issues impacting their city.

Federal agencies are collaborating. So are the Northwest Indiana Regional Development Authority (RDA), Northwestern Indiana Regional Planning Commission, and MPC — through our commitment to the Gary and Region Investment Project (GRIP). It’s an unprecedented discussion focused on directing the collective power of multiple public and private sector partners on a place-based revitalization strategy in Gary.

Chicagoland today is gathering inspiration from around the globe. Strikingly, there are few truly new tools, but many tactics for partnerships that remain rare in the United States. In Metropolitan Chicago, we’re determined to be the first out of the box.

3 Comments

I don’t trust The Infrastructure Trust. This is just privatization dressed up as a “Public-Private Partnership” A short time spent reviewing the P3 programs in Canada reveals many objections. But this one from Dr. Marvin Shaffer, an economist based in British Columbia, sums it all up. He did a study of these deals back in 2009. In an article for Canadian Centre for Policy Alternatives, “Flawed analysis props up in BC public private partnerships, he writes:

“However, the major and most obvious failing of Partnerships BC’s methodology is that it only focuses on the benefits of P3s and completely ignores the cost side of the equation. When private companies finance public projects, they pay higher interest rates on what they borrow and require a high rate of return on what they invest. The higher costs of private financing for P3s are built into the lease rates that taxpayers ultimately pay, and are much higher than the debt service costs that government would pay if it financed the projects itself. For large, expensive public infrastructure, that can add hundreds of millions of dollars to the total expenditures government incurs over the life of the project.”

It’s just another way for the 1% to transfer wealth from the 99% Don’t trust the trust.

Municipalities regularly go onto the bond market – look at what the BC Municipal Finance Organization does. Is this or how does it relate to Social Impact Bonds? Seems like a similar approach and the cautions noted in the previous comment would seem to apply. I am not at all sure that this is about innovative municipal practice; it is instead a pitch for a new revenue stream by financial entities – and we all know how responsible they have been.

They figure with P3 they can cut public employees and save cots, although I assume the savings won’t be adequate. And besides this what about the maintenance issue?http://www.bloomberg.com/news/2012-04-05/why-does-u-s-build-roads-if-it-can-t-pay-to-fix-them-.html
Why Does U.S. Build Roads If It Can’t Pay to Fix Them?
I should point out after US largest municipal bond market is in japan and Japan unlike US has no problem building or maintaining infrastructure. The difference seems to be role of national government in this.